Britain’s export recovery looking a little more elusive

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It looks like Britain might have to wait a while longer before its much-touted export recovery materialises.

Export orders growth flagged in July, according to two surveys of manufacturers over the last week.

Friday’s UK manufacturing PMI showed export order growth slipped to a four month low – with a warning that it could worsen.

Rob Dobson, senior economist at PMI compiler Markit, said:

“The concern is that the slowdown we are seeing is also a symptom of increased economic uncertainty both at home and in key export markets of Europe, in turn fuelled by worries about the Ukraine crisis. If the situation with Russia deteriorates further, we should expect goods exports to come under further pressure.”

And on Wednesday, the European Commission’s monthly survey of manufacturers showed the balance of UK export order books fell to its lowest since August last year.

Its quarterly survey also showed UK manufacturers’ competitive position in foreign markets outside the European Union sank to its lowest level since the first quarter of 2008 – clearly a reflection of sterling’s strength against the dollar.

The pound sank to a seven-week low against the dollar on Friday, although it is still more than 3 percent up from six months ago.

Of course, the other side of the argument is that weakening export growth also highlights the domestic strength of Britain’s economy right now.

Although manufacturing growth slowed in July, Britain still came top (jointly with Ireland) among the major economies surveyed in Markit’s PMI.

And it also topped the rankings for industrial sentiment and services sentiment in the EU, according to the Commission’s survey.

Policymakers are keen to see the recovery broaden from consumption and into investment and export-led growth.

While there’s been some progress on the investment front, exports – at least on the goods side — look set for a subdued few months ahead.

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Andy has worked for Thomson Reuters since 2007 and is UK economics correspondent based in Reuters' London bureau.
He was previously polling correspondent and a subeditor on both Reuters' Economics and Equities desks.